How to Read Sales Forecasts with Currency Conversions

This review will take into account currency conversions and explain the logic behind many of the forecasting amounts that are displayed as a result of currency conversions. For sake of discussion, let’s suppose sales opportunities are created in both USD and EUR. Assume Oracle is setup to indicate that all opportunity transaction summaries are converted to USD. Therefore currency conversions must exist in Oracle from EUR to USD to provide a total opportunities picture in USD.

The opportunity close date is EXTREMELY important. That date is used by Oracle to retrieve the currency conversion rate. Additionally the Win Probability is also of importance. All of the relative fields will be explained below in more detail.

The conversion rates for the close dates listed above are shown below. Unless a specific date is entered when the opportunity is created, or modified at a later date, the close date will automatically default to 90 days after the opportunity creation date (i.e. the number of days corresponding to the respective profile option). If a currency conversion rate does not exist for the close date listed on the opportunity, the conversion will not occur. An asterisk (*) next to the TOTAL would indicate that there is at least one missing currency conversion. (NOTE: The rates within this document are utilized solely for the purposes of this document and do not reflect actual current conversion rates.)

Sample Opportunity Display

Opportunity 1: The conversion rate from EUR to USD for the specified close date is 2.00. The win probability is 0, so Oracle takes into account the full opportunity amount when calculating the total USD amount for all opportunities shown.

Opportunity 2: Since the opportunity is in USD, there is no conversion rate. The win probability is 0, so Oracle takes the full value of the opportunity into account.

Opportunity 3: Same calculation as Opportunity 2.

Opportunity 4: The conversion rate from EUR to USD for the specified close date is 4.00. The win probability is 50%, so Oracle will only add 50% of the value of this opportunity to the Total Opportunity value.

Opportunity 5: The conversion rate from EUR to USD is 1.50 for the specified close date. The win probability is 50%, so Oracle will only add 50% of the value of this opportunity to the Total Opportunity value.

In addition to the information in the table, there are processes that run behind the scenes within Oracle. These processes run at specified intervals each day as defined by your organization. The processes take into account any currency conversion rates, updates to opportunities, and the addition of opportunities.

Oracle will calculate the currency conversion of a single opportunity based on the conversion rate that exists in Oracle for the opportunity close date.

When a forecast is summarized for a period of time – month, quarter, or year – Oracle will use what it calls a pseudo conversion rate. The currency conversion for all opportunities within that specified period is based on a single conversion. The conversion rate in Oracle is based on a system setting. Oracle will revert back 30 days from the current date and convert currencies based on the rate for those currencies and that date (current date minus 30).

In summary, forecast valuation can change from one day to the next for a variety of reasons:

1. Conversion rate is determined by current date minus 30 days. The conversion rate on one day may be different than another day.
2. Updates to the data are made each day. As opportunities are edited or created, the forecast data that exists will also change.
3. Opportunity changes that affect forecasts include status; win probability, currency, and amount. In the future if quota credit is split between one or more salespeople, the individual user forecasts will also take that quota percent into account when calculating forecast amounts.

Additional information on Sales Forecasting may be obtained from DARC Corporation.